Microsoft Said to Plan Phone If Partner Approach Falters

Microsoft Corp. Chief Executive Officer Steve Ballmer introduced the latest version of Windows Phone software, available on devices such as Nokia Oyj’s Lumia 920, to help his company win back share lost to competitors such as Apple Inc. Photographer: Jin Lee/Bloomberg

Nov. 3 (Bloomberg) -- Microsoft Corp. is making plans for
the possible creation of its own mobile phone to help it gain
share in the market for handheld devices, according to people
with knowledge of the company’s plans.

The company is considering building mobile hardware as a
back up, in the event that its current approach of providing
software to handset makers such as Nokia Oyj and HTC Corp.
falters, said the people, who requested anonymity because the
plans are private. Microsoft is for now confident that its
current strategy will succeed, the people said.

Chief Executive Officer Steve Ballmer introduced the latest
version of Windows Phone software, available on devices
including Nokia’s Lumia 920 and the HTC 8X, to help his company
win back share lost to competitors such as Apple Inc. Microsoft
has already demonstrated a willingness to build hardware, even
if it means competing with long-time partners, through the
creation of Surface, a tablet that runs Windows software.

“We are big believers in our hardware partners and
together we’re focused on bringing Windows Phone 8 to market
with them,” Redmond, Washington-based Microsoft said in an e-mailed statement yesterday.

Microsoft, the world’s largest software maker, embarked on
the Surface strategy on concern that its existing partners,
which include Hewlett-Packard Co. and Dell Inc., hadn’t been
able to devise their own hardware capable of going head-to-head
against the iPad, according to the people with knowledge of the
strategy. Microsoft’s Windows Phone group doesn’t currently have
comparable concerns regarding handsets, the people said.

‘Significant Shift’

Still, Microsoft wants to ensure that if the handset makers
come up short, the company won’t have to start building its own
hardware from scratch and on short notice, one of the people
said.

Doug Dawson, a spokesman for Espoo, Finland-based Nokia,
declined to comment, as did Kent Hollenbeck, a spokesman for
Taoyuan City, Taiwan-based HTC.

Ballmer highlighted the prospect of Microsoft building more
hardware in his annual letter to shareholders last month.

“This is a significant shift, both in what we do and how
we see ourselves -- as a devices and services company,” Ballmer
said in the letter. In interviews, Ballmer has declined to rule
out making a phone.

At the same time, the CEO is pleased with the work with the
handset makers have done, in particular HTC, people familiar
with his thinking said. When Ballmer showed a video of what’s on
his personal Windows Phone 8 handset on Oct. 29, the phone he
showed as his own was the new HTC model.

The Wall Street Journal previously reported that
Microsoft’s component-maker partners in Asia are already testing
parts for a Microsoft phone.